Timing

Timing attempts to provide
market equivalent returns over the long term, with a substantial reduction
in variability of returns. The two components of the Timing program are EZ+Macro
and Fear/Greed. This system trades rarely and splits its allocations between
ETFs tracking the S&P 500, the intermediate-term U.S. Treasuries, and cash.

Information is as of the close on November 26, 2007.

EZ+Macro

EZ Trend is up for the U.S. stock market as approximated by the S&P 500.
While the U.S. Ten-Year Treasury price is also bullish by EZ Trend, my latest
backtesting hasn't indicated that a position in bonds is warranted in this
EZ+Macro configuration.

It would take more sustained action than we have yet seen this year, for this
portion of the system to move, either partially or fully, to Treasuries.

Fear/Greed

The Fear/Greed model signaled a buy for the U.S. stock market in early November.
It would signal a sell only if $VIX relative to actual volatility fell to a
historically low level. This is a tough model to follow, as it demands a buy
and hold when fear is high and most people would like to sell.

Panic days are not "sell" signals to this portion of the model. Only increased
complacency, relative to the actual index volatility, would move this portion
of the system to cash.

The S&P 500 index is back near the lows of mid-August, as are the Russell
2000, the Nasdaq Composite, and the Dow 30. Interestingly, the tech-heavy Nasdaq
100 and small-cap-heavy NYSE Composite are still above their mid-August lows.
So are the strongest industries and several of the emerging and Asian market
country-specific ETFs. This is what some technicians refer to as a positive
divergence, since not all sectors or indices are confirming the weakness in
the S&P 500.

Today's action smacked of fear and panic. Of the ninety ETFs I track for Rotational,
only seventeen avoided losses today, and eleven of those were either bond or
currency ETFs; five experienced price gains over +1% today, and four of those
were BOND ETFs. Today was a "flight to safety."

Systems can sometimes be psychologically uncomfortable to follow. Systems
can sometimes be wrong. Regardless, I personally believe that it would make
little sense to invest in devising a system to follow, only to countermand
its signals with emotional responses and second-guessing.